Nigeria’s New Debt Strategy Sparks Sustainability Concerns as $1 Trillion Economy Goal Faces Risks

Nigeria’s revised Medium-Term Debt Management Strategy (MTDS) for 2024–2027 has stirred debate over the country’s rising debt burden, with stakeholders warning that the framework could undermine long-term fiscal stability. The Debt Management Office (DMO) recently unveiled the plan, raising the public debt-to-GDP ceiling from 40% to 60% and adjusting interest payment limits to 4.5% of GDP, a move analysts say creates more space for borrowing but also amplifies fiscal risks.

The update comes as Nigeria pursues its ambitious target of becoming a $1 trillion economy by 2030. However, experts caution that the new strategy reflects fiscal stress more than improved resilience. The country’s debt-to-GDP ratio has already surged from 19% in 2019 to 52.3% in 2024, driven by fresh loans, securitisation of N30 trillion in Central Bank overdrafts, and currency depreciation. Stakeholders argue that expanding borrowing thresholds without stronger revenue reforms may stall growth ambitions.

Industry leaders have urged the government to prioritize capital mobilisation and domestic savings instead of leaning heavily on debt. At a policy forum in Abuja, Chartered Institute of Stockbrokers (CIS) President Oluropo Dada stressed that Nigeria’s trillion-dollar dream requires structural reforms, particularly in manufacturing and technology. He warned that raising the ceiling to 60% without a clear savings and investment strategy risks worsening fiscal imbalances rather than driving growth.

The MTDS also shifts Nigeria’s debt mix, adjusting the domestic-to-external ratio from 70:30 to 55:45, which increases reliance on foreign borrowing. With external debt already accounting for 51.8% of total debt by end-2024, analysts at Afrinvest cautioned that FX volatility poses Nigeria’s biggest fiscal risk. Rising short-term foreign debt—already at 8.3% of external reserves, close to the 10% ceiling—further heightens refinancing pressure as revenues remain naira-based.

Despite new safeguards on interest rates and debt rollover, financial experts argue that persistent inflation and high borrowing costs will limit the effectiveness of the strategy. Johnson Chukwu, CEO of Cowry Asset Management, warned that the MTDS provides little assurance that funds will be channelled into productive investments. With oil production below two million barrels per day and non-oil revenues underperforming, analysts fear that ballooning debt service costs could derail Nigeria’s path to a $1 trillion economy by 2030.

Source: The sun